Day of equity rises but shockwaves threaten

Encouraging company results pushed the local sharemarket higher but equities are showing greater signs of volatility amid shifting international economic signals and mixed results during the first week or the corporate reporting season.

The stock rose 1.31 per cent to $4.64, a 4½ -year high. Perpetual fund manager Nathan Parkin said investors had been quixotic in their buying tendencies in the last week due to uncertainty over the outlook for reporting season while international indices remained in the lurch.

“People still want to buy stock, but in the back of their mind they’re thinking about risk more because reporting season numbers out are showing that times are still reasonably tough," he said.

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The benchmark S&P/ASX 200 index rose 0.3 per cent, or 14.7 points, to a 21-month high of 4935.70, with resources and financial services among the top performers. The index gained even as data from reporting season showed robust earnings growth to be in short supply.

Woodside Petroleum regained ground after RBC Capital Markets upgraded the stock to a “sector perform" from “underperform". The stock finished up 0.37 per cent to become one of the index’s biggest movers with a closing price of $35.180.

Mesoblast rose 11.62 per cent after the regenerative medicine company was granted new US and China patents for its proprietary stem-cell technology.

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Platypus Asset Management fund manager Prasad Patkar said he expected to see the local market respond less to the moves of major international indices over the coming month, as the onset of reporting season generated more stock-specific, local data for investors on which to base investment decisions.

“There are two months of the year – February and August – when the local equities market stops trading on the macro news flow and you can generally attribute market moves to stock-specific news," he said.

The advent of reporting season has already had a pronounced effect on local sectors. News Corp shares fell 3.24 per cent to $26.60 after the media outlet downgraded its full-year profit forecast during its half-year update.

“We’ve had a very disappointing year ratings-wise," chief operating officer Chase Carey told reporters, as he revealed that the outlet’s top earning television franchises American Idol and X Factor failed to garner larger audiences in 2012.

Paper and packaging manufacturer Amcor rose to a 52-week high and was one of the index’s biggest movers after announcing earnings per share are expected to rise 9.7 per cent over the year. The news follows the opening of the company’s $500 million paper recycling mill in rural NSW. The stock closed up 2.32 per cent at $8.82.

Mr Parkin argued that the month of February would act as an important “make or break" time for companies in sectors that have re-rated substantially.

“Companies will have to report in a way that justifies the share prices," Mr Parkin said. “The feeling is that the market will look through bad results, but I don’t think that’s the case."

Jason Murphy

Weakening global demand for the Australian dollar saw it trade at around its lowest level since November, while a flat official jobs report did nothing to move the currency.

The dollar fell below $US1.03 briefly and finished at $US1.033. Most of the slide happened on Wednesday night as overseas markets reacted to the weak retail sales numbers that had already driven the dollar down in Australian trading. It recovered slightly with the stockmarket yesterday afternoon as risk appetite improved.

Economists were divided on whether the jobs result was sufficiently weak to prompt a rate cut from the Reserve Bank of Australia next month, with JPMorgan’s Ben Jarman pointing to sluggish job trends.

“With the share of the population in employment at multi-year lows, weakness in labour income is baked in, which is the chief headwind to the consumer this year," he said.

Interest rate markets priced in a slightly lower chance of a rate cut at the March meeting of the RBA, with odds falling to 48 from 55 on the labour force figures.

Less chance of a rate cut normally would be correlated with a higher Australian dollar, as lower rates make investing in Australia less attractive. But that was hard to see yesterday.

ANZ currency strategist Andrew Salter said it was surprising to see an improved global economic outlook coincide with a falling Australian dollar.

He suggested that the improving global economy was leading to the unwinding of precautionary positions meaning funds that had opted for Australia as a haven may now be going to offshore bonds and equities.